Venezuela Discussing State Majority In Gas Project

Venezuela is in talks to convert two privately run natural gas projects to state majority joint ventures.

Venezuela is in talks to convert two privately run natural gas projects to state majority joint ventures, an energy official said on Monday, as the government moves to nationalize the OPEC nation's natural resources.

Jorge Luis Sanchez, head of the National Gas Entity (Enagas), said two onshore natural gas projects run by Spain's Repsol and France's Total are in talks to possibly cede a majority stake to state oil company PDVSA.

The announcement comes amid doubts over whether Venezuela will allow companies to continue holding a majority stake in gas projects amid a two-year campaign to take oilfields back from foreign companies.

Leftist President Hugo Chavez in January added to the doubts about Venezuela's intentions for the natural gas sector by calling for state majority across the entire energy industry.

"PDVSA needs to keep strengthening its presence in gas exploration and production, and there is a big opportunity to do that with the onshore projects," Sanchez said during a telephone interview.

"I think -- and I'm only providing the opinion of the president of Enagas -- that the state should have a majority stake in natural gas projects," he said.

Repsol holds a 51 percent stake in the Barrancas project, which produces around 20 million cubic feet per day for power generation.

Repsol, Total and two small energy companies produce over 100 million cubic feet per day at the 100 percent privately owned Ypergas facility.

The projects are among the few examples of Chavez's early efforts to woo private investment in gas by offering companies complete control over upstream projects.

Several exploration licenses granted to companies such as Chevron and Norway's Statoil were designed to allow companies a majority stake once they make commercial gas finds.

Analysts say changing the terms of the production licenses after exploration had been carried out would complicate the projects.

Chavez in January called for a legal reform requiring 100 percent state control over gas projects as part of a nationalization drive meant to deepen his self-styled socialist revolution.

Energy Minister Rafael Ramirez later said the government would not change the conditions of existing licenses but that future gas projects would require a majority stake.